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UK Department Stores – reasons to be cheerful

The department store was once the king of the high street. From the mid-19th century, long before the advent of the internet, they were the original one-stop shop. But recent news of profit warnings, redundancies and store closures for the UK’s other major department store chains provides clear evidence that times have changed. Even John Lewis, considered by many to be a blueprint for business success, has seen a sharp fall in profits. Is the end of the department store as we know it? Will any of the major chains survive? And what makes one chain more likely to survive than another?

Our previous article looked into the factors which have led to decline of the market, and in this article we look at where success can be achieved.

Reasons to be cheerful

The experience
For most people online shopping is a function, something to be done to get something you want or need. But going shopping is an experience and department stores can offer something extra to their customers.

Department stores can be expected to further enhance the experiential offering – providing reasons to meet (such as eating, drinking, etc through in-store cafes and restaurants) and reasons to engage (such as make-up counters providing beauty treatments). Department stores are the ‘destination store’ offering things that the rest of the high street and the internet cannot.

Department stores can also offer a range of experiences that cannot be achieved in any other single place. For example, John Lewis offers now offers a range of events and experiences such as fashion style talks, cookery classes and beauty treatments, and in its new store at Westfield shopping centre in White City, it also has an ‘experience desk’ offering consultations on a range of matters including home design to travel advice. John Lewis is not alone in offering a range of in-store services, with Harrods among others to offer their customers something extra.

The brand
Like all retailers, branding and market positioning is vitally important to department stores. Despite its recent struggles outlined above, John Lewis has long been hailed as a winning brand which is reflected by its leading market share in 2017 (having 25% of the department store market) despite its relatively small number of stores.
The Managing Director of John Lewis, Paula Nickolds, recognised the need to not only have a brand but to have the customer experience when she said: “Shops are moving from being a fulfilment destination to being somewhere where you experience a brand." This could even include customers researching a purchase in store, and then ordering online from home.

A large part of the John Lewis brand is its renowned partnership model. It has been considered so successful that other businesses have emulated it and former Deputy Prime Minister Nick Clegg even once called for Britain to become a "John Lewis economy". Major accounting firm Grant Thornton followed the John Lewis Partnership model when it decided to adopt its shared enterprise model for its UK practice in 2015.

The key to this is that John Lewis has quality and customer service embedded in its commitment to be ‘Never knowingly undersold’. Customers not only trust the brand, but they want to buy the products it is selling, with customers treat the tagline as a mark of quality and integrity rather than a price promise. It is a relationship of trust that ensures that the business knows who its customers are and its customers know what they are getting.

Another key factor in the success has been not to over-extend. The focus has always been on quality of stores and the customer experience, rather than sheer number of stores.
While John Lewis and its brand has been lauded, House of Fraser’s branding has been much maligned for not having a point of difference in a crowded market and not giving shoppers a good enough reason to buy.

Whilst the story for department stores has appeared bleak in recent times, there are ways for them to continue to be successful as they can continue to offer unique selling points to customers. It should be noted that, whilst there are associated job losses and impacts on the local retail environment, some closure of stores is a process of culling. This is a way of removing small stores that are unable to offer the comprehensive range required and therefore are not as profitable and cannot provide the full experience or fully represent the brand. Store closures do not necessarily mean death of the department store.

If you would like to discuss what this means for your retail business, please call +44 (0)20 7334 9191 or contact us.